In the face of ongoing geopolitical tensions, the global industrial goods sector is experiencing significant challenges from trade sanctions to conversations around the impact of decoupling  

Providing insight into the implications of the new world order on industrial goods companies, our panel of experts at Oliver Wyman, including Tushar Narsana, Junyi Zhang, and Wolfgang Krenz, share their perspectives, and offer advice on risk focus, recession correction, and preparing for uncertainty. Watch the video for their insights.

Eimear McDermott

Hi, and welcome to our discussion on the new emerging world order and its implications for industrial goods companies. I’m Eimear McDermott, I'm a marketing manager at Oliver Wyman and I'm excited to introduce our panel for today. Today we have Tushar Narsana from our Chicago office, Junyi Zhang from our Shanghai office, and Wolfgang Krenz from our Munich office.

We find the world in an interesting place right now, we're moving from a globalized world into a period of uncertainty, where we see geopolitical tensions rising, increased trade sanctions and conversations around decoupling, where the world would be split into different spheres depending on political and economic influence. Today, we're looking to discuss what the implications of this changing world are for industrial goods companies.

So, to start off the discussion today, could we talk about how this is impacting your particular countries. Tushar, would you like to start?

Tushar Narsana

Sure. In the US, geopolitical issues are part of the fabric now. Especially since 9/11, there's been a significant amount of change geopolitically and a lot of impact, of course. But it's always been what is prevailing, what is the current situation? And right now, we're all talking about the war, inflation, potential recession.

So we're attuned to it. It’s here to stay. It is just which issues are we dealing with at the current moment? That’s kind of how we think about it.

Junyi Zhang

Yeah. Regarding everything happening in China, I think we were lucky. China joined the WTO twenty-two years ago, but nowadays we are facing a different environment. And since 2020 we started from a government perspective. A dual circulation strategy, which means on one side we're facing a downturn in the economy. But we want to boost domestic economy and global trading growth as much as possible.

Second thing is we still want to maintain communication and export-import activities around the world. As a result, we have seen quite a lot of the changes in the tech side of the technology sector, in the investment side, and the manufacturing footprint. But it is a step-by-step process, as people seek to develop their own solutions to address the evolving circumstances.

Eimear McDermott

Wolfgang, how is the conversation in Germany?

Wolfgang Krenz

In Europe and specifically in Germany, it's a very big topic, especially given how export-oriented and globalized our economy is. And so, it's big. Europe is in a bit of a sandwich position, which is very hard to navigate for us. And also, there is a tension between, I would say, politics and business. Business wants to participate as fully as possible in all of the global markets. While politics is more pressing towards taking sides.

So, it's a very interesting mix.

Eimear McDermott

And if you speak to the CEOs of your clients, what are the main concerns for them? We'll start with you, Wolfgang.

Wolfgang Krenz

Well, these are pretty multifaceted conversations. I would say they typically start with supply chain. I mean, everybody thinks about reducing dependency on individual countries and diversifying their supply chain. And also, they need to think increasingly about how to comply with import-export controls that are coming from various places. So, they need to understand their supply chains and what is in their product in a lot of detail, in order to cope with that.

But it's not only supply chain, it's moving to their own manufacturing footprint, very fast and an obvious topic is China. And many have China set ups and have set them up as their Asian hubs. So, there’s a question, does that still work in the future? Do I need additional Asian hubs in order to cope in the new situation?

There's also, frankly, a discussion of, you know, can I survive if I don't have China anymore? And then there is a different level of discussion around footprint around the IRA and given the high energy prices in Europe around where to build capacity in the future, in which market. So that's all amounting to a big thing. And then lastly, we are talking about the market dimension.

Obviously, there is, I would say, a rediscovery of the ASEAN countries from a European perspective, on a broader scale, CEOs are contemplating their ability to participate and strategizing on the best approaches to engage in two or three spheres. And what do I have to do in order to do that? How do I compete in countries where it is not so clear which sphere they belong to?

And so, these are the sort of discussions I think, that I have.

Junyi Zhang

Yeah. From the perspective of China, we have two kinds of clients. One kind is global clients (MNC). They already have presence in China, but they vary significantly from each other, which means some clients do not have a strong presence in China, specifically. And nowadays they tend to adopt a light footprint strategy in China. They are also contemplating expanding their presence in the other ASEAN market and exploring options such as moving back operations or other strategies. Additionally, China is increasingly seen not only as a low-cost manufacturing and supply chain hub but also as an R&D center.

And more importantly, China plays a crucial role as a significant consumer market for these clients. In the face of an unstable situation, these clients are actively considering strategies to address the unique challenges and opportunities related to supply chains in China. They are specifically focused on finding solutions for China's domestic market and areas where they may not have a strong presence, particularly in Europe. Additionally, they are exploring ways to leverage China's technology and software expertise to expand into overseas markets.

And then we also have another type of clients which is local clients. They, as industrial players, are seeing the challenge in the future about relying solely on exports. So, they want to put their footprint into the overseas market, like in Europe, even like in America. So, step by step they are thinking of how to become a global company rather than a local one.

Tushar Narsana

Excellent points from my colleagues, you know, but just from an American perspective, there is and I'm sure it's true globally too, there is this “hangover”, from COVID and all the actions we did in COVID. We have to undo some of that now. I call that the “hangover”. Moreover, everything we have been discussing indicates that the future is going to look significantly different.

Supply chains will look different, technology will be different. Automation will play a more prominent role. So how do you do both? How do you continue innovating while undoing some of the effects of our actions the last few years? And then how do you look at the future? We lieve these are pretty exciting times. It's a lot of disruption, but at the same time, it's pretty exciting.

Eimear McDermott

Great. And the final question, is about the most important topic for your clients in this environment right now. Who would like to take that one first? Junyi, would you like to?

Junyi Zhang

We have witnessed a period of stable growth in the market for a considerable time, but now we are facing an uncertain environment. Everything, from job practices to the rapidly booming technology landscape, is marked by uncertainty. Considering this, I believe that scenario solutions and exploring different scenarios are crucial for my clients.

You need to have a plan B, Plan C, or Plan D ready for them, in order to prepare for that. This is very important, and the other thing that is very interesting, is that no matter if it goes up or down, there will be an opportunity. That is why Winston Churchill said "never waste a good risk or good challenge."

In this place, if we leverage this well, it can potentially lead to future growth for certain companies.

Wolfgang Krenz

Well, if I could have three pieces of advice for companies at this point, I think my first one would be to build your geopolitical muscle. I think in a more static environment, you didn't need to be able to analyze and assess these risks, but now you have to build that capability. So, we have to build the capability and the processes around it.

I think that is important. The second point is don't only focus on risk. I mean, that's the immediate thing that people do, but there's always opportunity involved in it. Think through what this all means for your competitors, maybe also competitors from different spheres, how they are becoming maybe more limited, what space does it open? So, I think there is also always a dimension of opportunity.

And then, as Junyi said, nobody can predict the future. So better to have scenarios of various futures and be prepared for it.

Tushar Narsana

Yeah, just building on that, we talk a lot about this upcoming slowdown, recession, correction, whatever word you would you like to use. I think there has to be some planning around that. There has to be some contingency planning around that. But at the same time, you cannot slow down the evolution that needs to happen to manufacturing companies.

They have to get ahead, they have to go through network changes. They have to go through technology automation. So just how do you balance those two? I think that's a very fun topic that we are talking a lot about with CEOs.

Eimear McDermott

Thanks Tushar and thanks to everyone on the panel today. It's been a really fascinating conversation about the different implications for industrial goods companies in this uncertain environment. Thanks so much for tuning in to our discussion today.

This transcript has been edited for clarity.

In the face of ongoing geopolitical tensions, the global industrial goods sector is experiencing significant challenges from trade sanctions to conversations around the impact of decoupling  

Providing insight into the implications of the new world order on industrial goods companies, our panel of experts at Oliver Wyman, including Tushar Narsana, Junyi Zhang, and Wolfgang Krenz, share their perspectives, and offer advice on risk focus, recession correction, and preparing for uncertainty. Watch the video for their insights.

Eimear McDermott

Hi, and welcome to our discussion on the new emerging world order and its implications for industrial goods companies. I’m Eimear McDermott, I'm a marketing manager at Oliver Wyman and I'm excited to introduce our panel for today. Today we have Tushar Narsana from our Chicago office, Junyi Zhang from our Shanghai office, and Wolfgang Krenz from our Munich office.

We find the world in an interesting place right now, we're moving from a globalized world into a period of uncertainty, where we see geopolitical tensions rising, increased trade sanctions and conversations around decoupling, where the world would be split into different spheres depending on political and economic influence. Today, we're looking to discuss what the implications of this changing world are for industrial goods companies.

So, to start off the discussion today, could we talk about how this is impacting your particular countries. Tushar, would you like to start?

Tushar Narsana

Sure. In the US, geopolitical issues are part of the fabric now. Especially since 9/11, there's been a significant amount of change geopolitically and a lot of impact, of course. But it's always been what is prevailing, what is the current situation? And right now, we're all talking about the war, inflation, potential recession.

So we're attuned to it. It’s here to stay. It is just which issues are we dealing with at the current moment? That’s kind of how we think about it.

Junyi Zhang

Yeah. Regarding everything happening in China, I think we were lucky. China joined the WTO twenty-two years ago, but nowadays we are facing a different environment. And since 2020 we started from a government perspective. A dual circulation strategy, which means on one side we're facing a downturn in the economy. But we want to boost domestic economy and global trading growth as much as possible.

Second thing is we still want to maintain communication and export-import activities around the world. As a result, we have seen quite a lot of the changes in the tech side of the technology sector, in the investment side, and the manufacturing footprint. But it is a step-by-step process, as people seek to develop their own solutions to address the evolving circumstances.

Eimear McDermott

Wolfgang, how is the conversation in Germany?

Wolfgang Krenz

In Europe and specifically in Germany, it's a very big topic, especially given how export-oriented and globalized our economy is. And so, it's big. Europe is in a bit of a sandwich position, which is very hard to navigate for us. And also, there is a tension between, I would say, politics and business. Business wants to participate as fully as possible in all of the global markets. While politics is more pressing towards taking sides.

So, it's a very interesting mix.

Eimear McDermott

And if you speak to the CEOs of your clients, what are the main concerns for them? We'll start with you, Wolfgang.

Wolfgang Krenz

Well, these are pretty multifaceted conversations. I would say they typically start with supply chain. I mean, everybody thinks about reducing dependency on individual countries and diversifying their supply chain. And also, they need to think increasingly about how to comply with import-export controls that are coming from various places. So, they need to understand their supply chains and what is in their product in a lot of detail, in order to cope with that.

But it's not only supply chain, it's moving to their own manufacturing footprint, very fast and an obvious topic is China. And many have China set ups and have set them up as their Asian hubs. So, there’s a question, does that still work in the future? Do I need additional Asian hubs in order to cope in the new situation?

There's also, frankly, a discussion of, you know, can I survive if I don't have China anymore? And then there is a different level of discussion around footprint around the IRA and given the high energy prices in Europe around where to build capacity in the future, in which market. So that's all amounting to a big thing. And then lastly, we are talking about the market dimension.

Obviously, there is, I would say, a rediscovery of the ASEAN countries from a European perspective, on a broader scale, CEOs are contemplating their ability to participate and strategizing on the best approaches to engage in two or three spheres. And what do I have to do in order to do that? How do I compete in countries where it is not so clear which sphere they belong to?

And so, these are the sort of discussions I think, that I have.

Junyi Zhang

Yeah. From the perspective of China, we have two kinds of clients. One kind is global clients (MNC). They already have presence in China, but they vary significantly from each other, which means some clients do not have a strong presence in China, specifically. And nowadays they tend to adopt a light footprint strategy in China. They are also contemplating expanding their presence in the other ASEAN market and exploring options such as moving back operations or other strategies. Additionally, China is increasingly seen not only as a low-cost manufacturing and supply chain hub but also as an R&D center.

And more importantly, China plays a crucial role as a significant consumer market for these clients. In the face of an unstable situation, these clients are actively considering strategies to address the unique challenges and opportunities related to supply chains in China. They are specifically focused on finding solutions for China's domestic market and areas where they may not have a strong presence, particularly in Europe. Additionally, they are exploring ways to leverage China's technology and software expertise to expand into overseas markets.

And then we also have another type of clients which is local clients. They, as industrial players, are seeing the challenge in the future about relying solely on exports. So, they want to put their footprint into the overseas market, like in Europe, even like in America. So, step by step they are thinking of how to become a global company rather than a local one.

Tushar Narsana

Excellent points from my colleagues, you know, but just from an American perspective, there is and I'm sure it's true globally too, there is this “hangover”, from COVID and all the actions we did in COVID. We have to undo some of that now. I call that the “hangover”. Moreover, everything we have been discussing indicates that the future is going to look significantly different.

Supply chains will look different, technology will be different. Automation will play a more prominent role. So how do you do both? How do you continue innovating while undoing some of the effects of our actions the last few years? And then how do you look at the future? We lieve these are pretty exciting times. It's a lot of disruption, but at the same time, it's pretty exciting.

Eimear McDermott

Great. And the final question, is about the most important topic for your clients in this environment right now. Who would like to take that one first? Junyi, would you like to?

Junyi Zhang

We have witnessed a period of stable growth in the market for a considerable time, but now we are facing an uncertain environment. Everything, from job practices to the rapidly booming technology landscape, is marked by uncertainty. Considering this, I believe that scenario solutions and exploring different scenarios are crucial for my clients.

You need to have a plan B, Plan C, or Plan D ready for them, in order to prepare for that. This is very important, and the other thing that is very interesting, is that no matter if it goes up or down, there will be an opportunity. That is why Winston Churchill said "never waste a good risk or good challenge."

In this place, if we leverage this well, it can potentially lead to future growth for certain companies.

Wolfgang Krenz

Well, if I could have three pieces of advice for companies at this point, I think my first one would be to build your geopolitical muscle. I think in a more static environment, you didn't need to be able to analyze and assess these risks, but now you have to build that capability. So, we have to build the capability and the processes around it.

I think that is important. The second point is don't only focus on risk. I mean, that's the immediate thing that people do, but there's always opportunity involved in it. Think through what this all means for your competitors, maybe also competitors from different spheres, how they are becoming maybe more limited, what space does it open? So, I think there is also always a dimension of opportunity.

And then, as Junyi said, nobody can predict the future. So better to have scenarios of various futures and be prepared for it.

Tushar Narsana

Yeah, just building on that, we talk a lot about this upcoming slowdown, recession, correction, whatever word you would you like to use. I think there has to be some planning around that. There has to be some contingency planning around that. But at the same time, you cannot slow down the evolution that needs to happen to manufacturing companies.

They have to get ahead, they have to go through network changes. They have to go through technology automation. So just how do you balance those two? I think that's a very fun topic that we are talking a lot about with CEOs.

Eimear McDermott

Thanks Tushar and thanks to everyone on the panel today. It's been a really fascinating conversation about the different implications for industrial goods companies in this uncertain environment. Thanks so much for tuning in to our discussion today.

This transcript has been edited for clarity.